Richard C. Longworth, senior fellow at The Chicago Council on Global Affairs, contributes his knowledge and ideas about issues that affect the Midwest.

Monday, January 23, 2012

The Higher Cost of Higher Education

In a global economy that demands at least some post-secondary education for all its workers, the same economy may be pricing these workers out of a chance for an education.

This is not exactly news, especially to parents and students who have seen the yearly increases in tuition and other costs gallop ahead of the inflation rate for many years. But a combination of factors -- continuing rising costs, unsustainable student debt, and a terrible job market -- may be pushing this problem to the crisis point. It's a national situation, of course, but of particular concern to the Midwest, which desperately needs to educate its workers for the global knowledge economy.

These thoughts are prompted by the news from Champaign-Urbana that costs at the University of Illinois for this fall's incoming freshmen will be $24,206 per year -- a 4.8 percent increase, which is well above the current inflation rate of 3 percent. This shouldn't come as a shock: tuition at public universities across the country has been going up every year by an average of no less than 5.6 percent above the inflation rate for at least the past decade. A little less than half of this year's increase, or $11,636, will go for tuition: the rest pays for student fees and room and board. Freshmen at other U of I campuses will pay slightly less than in Champaign-Urbana, but also sharply more than last year's freshmen.

These figures apply only to Illinois residents. Out-of-state students pay at least twice as much in tuition, and their total annual outlay will be half as much again as for in-state students.

This is not to point a finger at Illinois. College costs everywhere, including the other big Midwestern state universities, are rising just as fast, leading to the inevitable question:

Is it worth it?

Until now, the answer has been yes. All studies show an "education gap," with college graduates earning much more -- about 66 percent more -- over their lives than non-grads. Certainly, demand is up: the University of Illinois reports an 8 percent increase in applications for this fall's class, with 31,000 applications competing for 7,000 places in the freshman class.

There's no reason to think this will change. But a prolonged recession, coupled with an ailing job market, coupled with growing anecdotal evidence of college grads moving back in with their parents, eventually will make many families hesitate before committing some $100,000 to a four-year education that, in itself, might not be enough to admit a young grad to the ranks of the well-paid. Throw in shrinking pensions, falling house prices and other factors that are squeezing parental budgets, and the doubt can only grow.

And then add in the issue of debt. Students these days are emerging with a debt load that is becoming a national scandal. Illinois Sen. Dick Durbin and others are warning that student debt -- billions of dollars in debt, owed to banks or the government, that most likely will never be repaid -- could create a crisis similar to the sub-prime mortgage debt catastrophe.

Something has to give. It hasn't yet. But common sense says it will.

Already, lower-income students are being priced out of the market. Student aid is supposed to help such students but colleges and universities, in a desperate struggle to attract top students, have been switching from need-based aid to merit scholarships, which increasingly go to less needy middle-class students.

It seems likely that community colleges, offering two-year programs at much lower rates, will pick up business. Many community colleges report they already are enrolling more students who see them as a low-cost and perfectly adequate substitute for the more expensive freshman and sophomore years at Champaign-Urbana and other big schools. Since the recession began, community colleges have been swamped by laid-off workers seeking retraining, but that demand is receding now, leaving more room for traditional students.

A debate, more or less confined to the campus, has begun over whether a four-year undergraduate education is really necessary. More cooperation between high schools and colleges could enable high school students to do some college work, especially during their senior years, which are widely viewed by educators as a waste of time. Similarly, college students bound for graduate school could easily cram their undergrad work into two or three years.

Law schools in particular are considering this. Many law schools have been hit both by falling enrollments, due to the crushing debt load and a sharply reduced demand for new lawyers, coupled with accusations that they're not really preparing their students to practice law. This has led to suggestions that potential law students spend two years in undergraduate work, followed by two years of law school and a third year of apprenticed education -- five years of education instead of seven.

James Duderstadt, the former president of the University of Michigan, wrote a paper for the Chicago Council on Global Affairs, A Master Plan for Higher Education in the Midwest, urging a rethinking of the relationship between undergraduate and graduate education. One suggestion: big research universities like Illinois should concentrate on graduate education and research, probably financed by government and corporate grants, turning undergraduate education over to community colleges and smaller four-year colleges, both public and private.

At the least, colleges should trim unnecessary costs, such as expensive recreational facilities, new dorms, fancy dining halls and, certainly, the indefensible outlays on major athletics. To do this, though, they will need to stand up to alumni pressure and to gamble that they can still draw good students without laying on the frills. At the least, there is no sign of this happening yet.

Instead, the pressure is to keep raising the price tag for students. Theoretically, the governments of states such as Illinois should be coming to the rescue of the universities that bear their name, if only to keep education affordable for the students of those states. In fact, states are cutting back so drastically that state support now accounts for barely 10 or 15 percent, sometimes less, of the operating expenses of these schools.

In a rational world, citizens would be demanding more public support for the kind of education on which the region's economic future depends. Again, the opposite is true. Growing inequality between the educated and less educated, a declining economy, and the soaring cost of higher education has produced a popular backlash against universities that makes state aid a very hard sell politically.

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In Indiana, the state legislature wants to take tuition setting authority away from state colleges (who receive very little funding from the state) and give it to the state higher ed commission. Daniels also wants to cap the number of credit hours required for a degree, requiring special state approval for what he deems excessive credits. And the legislature wants to restrict the ability of the state's universities to expand their high speed fiber networks to ancillary institutions. Many rural legislators have been upset for a while that Johnny can't get into IU as admissions standards have tightened.

There's a movement, mostly on the political right, that has been talking about a "higher education bubble," mostly driven by government policies. A college degree is now an essential credential, with the more elite schools being worth a ton. We provide gov't guaranteed students loans to basically anyone who asks. And we've made student loan debt non-dischargeable in bankruptcy. This lets colleges more or less print money by jacking tuition sky high and loading massive debts onto their grads. This is the one Occupy complain that resonated with the right.

Clearly something has to give at some point. A lot of the tuition money has not gone into education, but rather into the construction of lavish facilities and programs to attract students. Dorm rooms today are a far cry from when I went to school, I can tell you that. And I'm not that old. One day students and parents are going to wake up and realize that the bill for what amounts to a four year luxury vacation is being paid for by them.

The Global Midwest Initiative of The Chicago Council on Global Affairs is a regional effort to promote interstate dialogue and to serve as a resource for those interested in the Midwest's ability to navigate today's global landscape.